Taxes Code to be implemented from fiscal 2011-12: Pranab

The government plans to implement the Direct Taxes Code DTC from 201112 after addressing all concerns relating to controversial proposals like taxation of retirement benefits weeding out incentives for housing sector and changes in the Minimum Alternate Tax MAT The proposals in the code are only illustrative and are open for discussion and there is no need to think that these have been decided Finance Minister Pranab Mukherjee said Giving the roadmap for the Code that will replace the Income Tax Act of 1961 he said It will be implemented from 2011 So the finance bill of 201112 would be appropriate The government Mukherjee said has identified seven critical areas of concern in the Code and would take suggestions on board before finalising it The critical areas of concern include shifting the base for computation of Minimum Alternate Tax MAT from book profits to assets capital gains taxation in case of nonresidents double tax avoidance agreements General AntiAvoidance Rules GAAR taxation of foreign companies taxation of charitable institutions and shift to EET system for taxation of savings On the issues relating to taxation of savings at the time of withdrawal the Minister said Whether it will be EET exempt exempt tax or ETE exempt tax exempt is to be finally arrived at a decision So one need not rush to the conclusion that it has been decided That is the short point that I would like to make it clear DTC has proposed that all savings schemes should be taxed at the time of withdrawal Under the current dispensation the savings schemes like Public Provident Fund PPF and General Provident Fund GPF are not taxed at all while in some schemes like National Savings Certificate NSC only interest accruals are taxed The code is also silent on tax incentives for housing sector as against the current practice of provide rebate on repayment of interest and principal on home loans As regards the MAT the Code proposes to levy minimum tax on assets instead of book profits The proposal evoked sharp reaction from the industry which described the move as introducing wealth tax on enterprises Referring to his interaction with the representatives of the industry on the Code at Delhi and Bangalore Mukherjee said I told them to express their views candidly final decision will be taken after obtaining inputs from various stake holders and in depth discussionsThe direct tax reforms are basically aimed at doing away with the plethora of exemptions Mukherjee said adding if somebody analysis the Act of 1961 as amended from time to time now will realise that the original character of the Act is lost through a series of amendments All 22 alphabets are lost than 1234 are also put while amending the Act It is substantially because of plethora of exemptions So attempts have been made to make to simplify it and in that process some critical areas and vital areas may have been left out he added